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CFA Level 1
Quantitative Methods

Calculating Test Statistic for Hypothesis Testing

Very Easy Hypothesis Testing Test Statistics

In hypothesis testing, the test statistic helps us determine whether to reject the null hypothesis or not. The test statistic is often a standardized value that is calculated from sample data during a hypothesis test.

Suppose we are testing the null hypothesis $H_0: \mu = 100$ against the alternative hypothesis $H_1: \mu \neq 100$. In this context, the test statistic is calculated using the formula:

$$ z = \frac{\bar{x} - \mu_0}{\frac{\sigma}{\sqrt{n}}} $$

Where:

  • $\bar{x}$ = sample mean
  • $\mu_0$ = hypothesized mean (100 in this case)
  • $\sigma$ = population standard deviation
  • $n$ = sample size
If the sample mean $\bar{x}$ is 105, the population standard deviation $\sigma$ is 15, and the sample size $n$ is 30, what is the value of the test statistic?

Hint

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